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Secure Act 2.0

On December 29th of last year, the SECURE Act 2.0 was signed into law. The SECURE Act 2.0 is an enhancement to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. Most of the enhancements introduced revolve around qualified plans; however, it also expands to other popular savings accounts, and some of the changes might impact you in some capacity. While the bill covers many items, we will only touch on a couple of highlights in this month’s e-Newsletter and go into further detail in the Spring edition of the Envisionary.  

One of the most significant changes because of the SECURE Act 2.0 is the rules around Required Minimum Distributions (RMD). Beginning January 1st, 2023, the Required Minimum Distribution (RMD) age has increased from age 72 to age 73. For those of you who are set to turn 72 in 2023 and were expecting to have to take your first RMD this year, you can relax, as you will not have to start your RMDs until 2024. This change does not impact those who have already begun taking RMDs before this year; you will continue to do so. By 2033, the RMD age will be pushed up to age 75. 

Another interesting highlight to come out of the SECURE Act 2.0 is the ability to convert unused 529 plan savings to Roth IRAs for the account beneficiaries. Beginning in 2024, if a beneficiary of a 529 plan has unused savings towards education, they may have the ability to roll this into a Roth IRA for their benefit. Up to $35,000 can be converted into the Roth IRA subject to the account being open for at least 15 years, and annual rollover amounts not to exceed the Roth annual contribution limits. This change gives the 529 account owner another option to consider in the event their beneficiary has not used the entire savings for education. Instead of cashing out the 529 plan and paying taxes and penalties, they can now fast-track their Roth IRA.  

Stay tuned for our 2023 Spring Envisionary for more updates on the SECURE Act 2.0, as it involves much more. Expect additional information on topics such as increased catch-up provisions on specific retirement plans, expanding the use of Roth accounts to SEP and Simple plans, changes to Roth employer plans, and more.

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This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. (C) Twenty Over Ten